A pause for breath before the Santa FTSE rally

The FTSE 100 has struggled over the past month. Since hitting a high of 6819 on 30th October, the UK’s benchmark index has slowly tracked back to trade around the 6700 level.

Take a look at the below chart and this may convince you that the FTSE 100 is treading water following an 8% rally from the lows of 6316 on 9th October.

Yet bring the picture back two years and you can see that the FTSE’s upward trend remains intact and the recent ‘treading water’ is perhaps nothing to be too concerned about, no matter how frustrating it may be for buyers in the market.

Not a lot has happened over the past month. There have not been any real significant factors that would immediately warrant a step up in risk appetite. In fact, over the past few months we have had some very high profile IPO’s to sway investors’ focus, namely Royal Mail and Twitter.

Santa Rally time
But we are now heading into one of the more certain periods of the financial markets, Christmas and December’s trading. You may remember our very popular FTSE Xmas Present infographic last year. Well the sentiment remains exactly the same this time around and after December 2012, the stats have become even more impressive.

The FTSE 100 has rallied from the start to the end of December every time in the last 10 years.

The average amount of points the market has rallied in December now stands at 147.2pts. Indeed, last year was the second weakest FTSE December rally during the same ten year period with the FTSE finishing just 31pts higher on the month. But yet, the market still rallied. With QE tapering unlikely to be on the cards until Q2 next year, this year’s trade could be more of the same.

So whilst the FTSE may be treading water somewhat in the last month, this could just be the pre-cursor to the traditional FTSE santa rally.